January 23, 2007 |
|US Treasuries edged higher on Monday in range-bound trade as investors sought value after the market’s dramatic sell-off and awaited home sales data due this week.|
With the market facing a supply of paper and talk overnight of China and the Organisation of the Petroleum Exporting Countries diversifying reserves out of the Treasury market, some dealers found the move lower counter-intuitive.
The US Treasury said it would sell $20bn of two-year notes tomorrow, followed by $13bn of five-year notes on Thursday, unchanged from prior sales. In addition, $9bn of four-week bills are to be sold on Tuesday.
Michael Englund, analyst at Action Economics, said: “While supply could keep yields biased higher, technical traders say the market is oversold and further upside may be limited by a lack of data catalysts.”
By late afternoon in New York, the yield on the benchmark 10-year bond was 2.4 basis points lower at 4.759 per cent. The two-year note yield was down 1.7bp at 4.915 per cent.
Eurozone government bonds pushed higher, with the relatively high level of yields drawing buyers. As prices rose, the yield on the 10-year Bund fell 2.5bp to 4.025 per cent while the two-year Schatz was down 1.7bp at 3.937 per cent.
Gilts were mixed, with short-dated paper under pressure. Investors are still preoccupied with the prospect of further interest rate rises by the Bank of England. Minutes from the last rate-setting meeting, this month, when the Bank raised rates to 5.25 per cent, are due for release on Wednesday.
The yield on the two-year gilt rose 1.7bp to 5.491 per cent in late trading but had pushed above 5.51 per cent earlier. Meanwhile, 10-year gilt prices were higher, with the 10-year yield down 1.9bp to 4.890 per cent.
Prices rose and yields fell further still for Japanese government bonds as traders’ doubts grew about whether the Bank of Japan would raise rates next month. The bank confounded expectations last week by keeping interest rates steady. The yield on the 10-year fell 5.5bp to 1.655 per cent.